SEBI Proposes Checks to Prevent AIFs from Facilitating the Circumvention of Financial Regulations
- Blog|News|Company Law|
- 2 Min Read
- By Taxmann
- |
- Last Updated on 22 January, 2024
Latest from Taxmann
SEBI Consultation Paper Dated, 19-01-2024
The SEBI observed that many instances of AIFs being structured to facilitate circumvention of different financial sector regulations have come to light, thereby eroding trust in the system. Therefore, with an objective to restore trust and prevent such circumvention, while at the same time ensuring minimal impact on legitimate AIF investments, SEBI on 19th Jan, 2024 has floated a consultation paper on a proposal to enhance trust in the Alternative Investment Funds (‘AIF’) ecosystem to facilitate Ease of Doing Business measures.
SEBI has come across more than 40 cases involving over INR 30,000 crores, where AIFs appear to have been structured to facilitate circumvention of certain financial sector regulations.
SEBI has identified some of the identified modus operandi where AIFs are being structured to facilitate circumvention of financial sector regulatory frameworks such as the ever-greening of loans by regulated lenders and circumvention of FEMA as well as Qualified Institutional Buyer norms. AIFs have been set up resulting in the ever-greening of stressed loans of some regulated lenders, thereby circumventing RBI regulations.
All these practices seriously impact the overall trust and integrity of the AIF ecosystem. Therefore, a need has been felt to prevent undesirable events/misuse (i.e. prevent Type I errors), while ensuring that regulations do not come in the way of legitimate investments (i.e., prevent Type II errors).
In this regard, the SEBI has proposed to introduce a requirement that AIFs, Managers of AIFs, and the Key Management Personnel of AIFs and their managers shall ensure that AIFs do not facilitate circumvention of extant financial sector regulations. Further, it is proposed that SEBI shall frame the principles that shall guide the framing of the specific and verifiable standards for due diligence that the stakeholders of the AIF will need to conduct for ascertaining whether the participation of an investor in a particular investment of the AIF facilitates circumvention of extant regulations.
The SEBI has sought public comments with regard to the proposal given above. The comments/suggestions on the proposals may be provided through an online web form or via e-mail to afdconsultation@sebi.gov.in latest by 11th Feb, 2024.
Click Here To Read The Full Updates
Disclaimer: The content/information published on the website is only for general information of the user and shall not be construed as legal advice. While the Taxmann has exercised reasonable efforts to ensure the veracity of information/content published, Taxmann shall be under no liability in any manner whatsoever for incorrect information, if any.
Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.
The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:
- The statutory material is obtained only from the authorized and reliable sources
- All the latest developments in the judicial and legislative fields are covered
- Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
- Every content published by Taxmann is complete, accurate and lucid
- All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
- The golden rules of grammar, style and consistency are thoroughly followed
- Font and size that’s easy to read and remain consistent across all imprint and digital publications are applied
Sign Up
To subscribe to our weekly newsletter please log in/register on Taxmann.com
Latest Books
Everything on Tax and Corporate Laws of India
To subscribe to our weekly newsletter please log in/register on Taxmann.com
